TAKEOVER NORMS MORE STRINGENT

In order to prevent promoters from influencing stock prices through frivolous open offers, Sebi today said no offer can be withdrawn on the ground that it is not successful. The decision was taken to address the concerns that some acquirers use the public announcement as a means to influence the market price and subsequently attempt to withdraw the offer on the pretext that the acquisition was not successful. In a notification, Sebi (Securities and Exchange Board of India) said: "An acquirer shall not withdraw an open offer pursuant to a public announcement made...even if the proposed acquisition through the preferential issue is not successful."
Sebi said that a company can acquire the shares of the target company through preferential issue or through the stock exchange settlement process, other than through bulk deals or block deals, in case such shares being kept in an escrow account. However, the acquirer firm can not exercise any voting rights over such shares kept in this account.

The regulator said that these shares can be transferred from the escrow account to the acquirer after the expiry of 21 working days from the date of the detailed public statement, provided the acquirer deposits 100 per cent of consideration payable in cash in the escrow account.
At present, takeover regulations do not allow completion of acquisition of shares or voting rights which triggers the open offer obligations until the expiry of the offer period. Currently, such acquisition can be completed after the expiry of 21 working days from the date of the detailed public statement, provided the acquirer deposits 100 per cent of consideration payable in cash in the escrow account.
Sebi also said that where open offer obligations are triggered - pursuant to an agreement or otherwise in combination of any modes of acquisition - the relevant date for making the public announcement and determination of offer price would be the earliest date on which obligations are triggered. In order to avoid any uncertainty or controversy about the exact date on which share price or valuation would take place, Sebi said date of the board decision would be effective.
Sebi said that if voting rights of a shareholder, not part of buyback arrangement, goes beyond the threshold level, the open offer requirement would not be triggered. In such cases, Sebi noted that open offer requirement would not be triggered if voting rights are brought below the threshold limit within 90 days from the date on which the voting rights so increase. Besides, Sebi said that any entity or person acting in concert holds more than 5 per cent shares or voting rights in a target company, is required to disclose this even if such change results in shareholding falling below five per cent.